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Here's why UK watchdog has warned against China's ZTE

17 Avril 2018

However, it seems U.S. intelligence agencies are convinced that the company hasn't learned its lesson yet and is still continuing to do dirty business behind America's back.

The UK's National Cyber Security Centre (NCSC) warned the use of ZTE equipment would "have a long term negative effect on the security of the UK". The biggest stinging point of this ban lies in ZTE's loss of access to Qualcomm components, including the Snapdragon line of SoCs.

The ban followed ZTE's failure to comply with a 2017 agreement with the USA government to discipline employees who had overseen plans to ship equipment to Iran.

It had also promised to fire four senior employees and reprimand 35 others as part of the agreement but ZTE admitted in March that while it did fire the four employees, it didn't reprimand the others.

Just one year later, the DoC says it will be exercising that clause after finding that, while negotiating that settlement, ZTE had lied to the department's Bureau of Industry and Security.

According to Secretary of Commerce Wilbur L. Ross, Jr., ZTE made false statements to BIS in 2016 during the settlement agreement and later when an update was requested by the USA government. On April 16, Secretary of Commerce Wilbur L. Ross, Jr.

These declarations ring rather hollow.

But US Commerce Department investigators said it made additional false statements multiple times about having taken action against the employees responsible, when it had not.

Either way the Chinese companies are making headway, with Huawei for example emerging as the world's third largest smartphone maker by volume.

Chinese telecoms business ZTE Corp has suspended trading today after Britain's cybersecurity watchdog warned United Kingdom companies against working with the business. It has sold handset services to major USA companies, including AT&T, T-Mobile and Sprint. The majority of the ZTE smartphones in the USA are sold by the carriers. Yes, not sending letters is what got ZTE into this mess.

Qualcomm's shares dropped 1.7 percent on Monday.

There will be impact on US-based telecom equipment component suppliers as well.

Although Qualcomm's CEO Steve Mollenkopf received assurances from China's vice president during a meeting in late March that the transaction wouldn't be affected by global politics, according to the Wall Street Journal, observers are nonetheless cautioning that China could withhold approval in retaliation for us tariffs on Chinese imports. The company has also been found guilty of similar violations with relation to North Korea.

At the same time, the UK's cyber defense watchdog, the National Cyber Security Centre (NCSC), has warned United Kingdom telecoms firms that the use of ZTE equipment or services pose a risk to national security.

The U.S. government recently put pressure on telecommunications companies to stop buying Huawei networking equipment and consumer electronics products.

Here's why UK watchdog has warned against China's ZTE